Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 517: Prices vs Quantities with Multiple Pollutants
Stefan Ambec () and Jessica Coria ()
Additional contact information
Stefan Ambec: Toulouse School of Economics (INRA-LERNA) and University of Gothenburg
Jessica Coria: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: We examine the choice of policy instrument price, quantity, or a mix of the two when two pollutants are regulated and firms’ abatement costs are private information. A key parameter that affects this choice is the technological externality between the abatement efforts involved, i.e., whether they are substitutes or complements. If they are complements, a mix policy instrument with a tax on one pollutant and a quota on the other is sometime preferable, even if the pollutants are identical in terms of benefits and costs of abatement. Yet, if they are substitutes, the mix policy is dominated by taxes or quotas.
Keywords: pollution; environmental regulation; policy mixes; tax; emission standard; asymmetric information
30 pages, September 27, 2011
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